Toshiba 2003 Annual Report Download - page 50

In January 2003, the Emerging Issue Task Force reached a consensus on Issue No. 03-2, Accounting for the Transfer
to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities (“EITF 03-2”), which
addresses accounting for a transfer to the Japanese government of a substitutional portion of EPFs. In
September 2002, the Company received an approval from the Japanese government to transfer the future benefit
obligation related to the substitutional portion. In addition, the Company will submit another application to sepa-
rate the remaining substitutional portion related to past sevice by its employees. The Company expects to
receive final approval from the Japanese government for its second application during the year ending March 31,
2004. Upon receipt of the final approval, the Company will be relieved of all obligations pertaining to the substitutional
portion by transferring the benefit obligation and the related government-specified portion of the plan assets which
are computed by the Japanese government. The Company will account for the entire process upon completion of
the transfer to the Japanese government of the substitutional portion of the benefit obligation and the related plan
asset, as the culmination of a series of steps in a single settlement transaction under EITF 03-2. The effect of the
completion of the transaction has not yet been determined because the amount of the benefit obligation and the
related plan assets to be transferred may change significantly.
Research and development costs are expensed as incurred and amounted to ¥331,494 million ($2,762,450
thousand) and ¥326,170 million for the years ended March 31, 2003 and 2002, respectively.
Advertising costs are expensed as incurred. Advertising expenses amounted to ¥41,911 million ($349,258
thousand) and ¥59,390 million for the years ended March 31, 2003 and 2002, respectively.
For the years ended March 31, 2003 and 2002, the net foreign exchange losses are ¥15,614 million ($130,117 thou-
sand) and ¥6,682 million, respectively.
During the year ended March 31, 2003, the Company recorded restructuring charges of ¥10,906 million
($90,883 thousand) principally related to its Display Devices and Components division. Included in the restructuring
charges is impairment of manufacturing facilities of ¥7,815 million ($65,125 thousand) for the year ended March 31,
2003.
During the year ended March 31, 2002, the Company recorded restructuring charges, which consisted of various
reorganization costs totaling ¥111,280 million primarily related to the “01 Action Plan,” and additional termination
benefits for voluntary early retirement of ¥97,674 million.
The reorganization costs of ¥111,280 million comprised the following:
For the year ended March 31, 2002, the Company recorded an impairment loss of ¥55,247 million for assets to be
held and used related to machinery and equipment pertaining to memory products. In conjunction with a decision
to exit the commodity DRAM business, the Company announced in December 2001 that it would sell Dominion
Semiconductor, L.L.C. (“Dominion”) to Micron Technology, Inc. (“Micron”). The sale covers all of the assets of
Dominion, including its land, buildings and DRAM production equipment. In connection with the sale, certain NAND
flash manufacturing equipment was transferred to a Company facility in Japan. Furthermore, the Company
determined to liquidate a wholly-owned subsidiary, which had been engaged mainly in the assembly of
DRAMs. In connection with such reorganization of the DRAM business, the Company has incurred losses on dis-
posal and impairment for building, machinery and equipment of ¥5,125 million and various other losses including;
losses on contract terminations, purchase commitment losses, dismantling costs for machinery and equipment to
be disposed of, totaling ¥31,083 million. The Company paid substantially all of the restructuring liabilities during
the year ended March 31, 2003. Other reorganization costs of ¥19,825 million mainly related to impairment
losses of building, machinery and equipment for other businesses to be discontinued or already discontinued.
The Company recorded a loss of ¥97,674 million with respect to the additional termination benefits for the voluntary
early retirement of approximately 8,200 employees under the “01 Action Plan.” Substantially all of these additional
termination benefits were paid as of March 31, 2002.
Approximately ¥79,993 million of the restructuring charges are non-cash charges. At March 31, 2003, approximately
¥2,365 million ($19,708 thousand) of restructuring charges remain accrued for by the Company.
The Company is subject to a number of different taxes based on income which, in the aggregate, result in a normal statu-
tory tax rate in Japan of approximately 42.1 percent for the years ended March 31, 2003 and 2002, respectively.
Commencing with the year ended March 31, 2003, the Japanese tax regulations is permit the filing of a consolidated
tax return. In connection with its introduction, a temporary surtax of 2.0 percent is assessed for consolidated tax returns
filed for the years ending March 2003 and 2004. Upon the initial filing of a consolidated tax return, net operating loss
carryforwards previously generated by a company’s subsidiaries will expire. A change in the corporate enterprise tax
rate was enacted in March 2003 and is effective for tax periods ending March 31, 2005.
In 2003, Toshiba Corporation applied for and obtained approval from the Japanese tax authorities to file a tax return
for the consolidated group starting from the year ending March 2004. As a result of the change in the corporate enter-
prise tax rate and commencement of the consolidated tax return filing, the Company’s normal statutory tax rate will
change from 42.1 percent to 43.9 percent for the year ending March 31, 2004 and to 40.9 percent for the years end-
ing on or after March 31, 2005. The effect on deferred tax assets and liabilities of the future change in the tax rates
recorded as deferred tax expense for the year ended March 31, 2003 was ¥4,373 million ($36,442 thousand).
48 TOSHIBA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14.
RESTRUCTURING
CHARGES
11.
RESEARCH AND
DEVELOPMENT EXPENSES
12.
ADVERTISING COSTS
13.
FOREIGN EXCHANGE
GAINS AND LOSSES
15.
INCOME TAXES
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